CTS Corp. v. Dynamics Corp. of America

Supreme Court of the United States · 1987 · Corporations

481 U.S. 69 (1987)

Updated August 1, 2026

Corporationscontrol share statutesinternal affairscontrol share acquisitionvoting rightstender offersWilliams Actpreemption

Facts

Indiana enacted a control share statute applicable only to certain Indiana incorporated public corporations, under which shares crossing 20%, 33 1/3%, or 50% ownership thresholds lose voting rights unless disinterested shareholders restore them by resolution. The acquiror may force a special shareholder meeting within 50 days by filing an acquiring person statement and paying the meeting's expenses. Dynamics owned 9.6% of CTS, an Indiana corporation, and announced a tender offer that would have increased its stake to 27.5%. After CTS's board opted into the statute, Dynamics claimed the statute was preempted by the Williams Act and unconstitutional under the Commerce Clause.

Issue

Whether Indiana's Control Share Acquisitions Chapter is preempted by the Williams Act because it frustrates the purposes of federal tender offer regulation, and whether the statute violates the dormant Commerce Clause by burdening interstate commerce.

Rule

Absent explicit congressional intent, state law is preempted only when compliance with both federal and state law is impossible or when the state law stands as an obstacle to the full purposes and objectives of Congress. A state corporate law governing only corporations created by that state, applying evenhandedly to residents and nonresidents, and posing no risk of inconsistent regulation by multiple states does not violate the dormant Commerce Clause merely because it may affect interstate tender offers.

🔒

See the holding & full analysis

Create a free KwikCourt account to unlock the rest of this brief — and practice the case.

The court's holding and reasoning
Doctrine tests, pitfalls & exam hypotheticals
10 practice questions + 4 AI-graded essays on this case

Free sample · practice this case

Test yourself

One of 10 multiple-choice questions for this case. Pick an answer to see why.

Ohio enacts a statute providing that when any person acquires more than 25% of the voting shares of an Ohio-incorporated public corporation, those newly acquired shares may not be voted unless disinterested shareholders later approve the voting rights. The bidder may demand a special meeting within 45 days by filing an information statement and paying the meeting costs.

A bidder launching a tender offer for an Ohio corporation argues the state statute is preempted by federal tender-offer law because it regulates the same transaction. Which is the strongest response?

Explanation. Absent an explicit congressional command, preemption exists only where dual compliance is physically impossible or the state law stands as an obstacle to Congress's full purposes and objectives. A statute conditioning voting rights in shares of a domestic corporation does not itself make compliance with federal tender-offer rules impossible. Under the majority's reasoning, such a law is not preempted merely because it affects takeover strategy. (Derived from CTS Corp. v. Dynamics Corp. of America (1987).)